Micro-apartments – An emerging investment sector.
Appearing across global cities from New York to Singapore, ‘micro-living’ is the new word on the street and London is about to become the next hot spot. Catering for the 20-something workforce, these are the new generation - people who want to be in walking distance to work, want to live in readymade communities with similar-minded individuals and want everything right now.
In cities with an escalating cost of living and real estate prices to match, tenants are willing to compromise on space to get what they want. According to industry sources, 83% of rental units in Prime Central London are now two bedrooms or less and almost 80% are let to single people.
As accommodation gets smaller and smaller in prime addresses, space optimisation and a high-spec fit outs become increasingly important. So does meeting the lifestyle requirements of different demographics, from ‘Co-Living’ for young domestic professionals to ‘Senior Living’ for the older generation.
Whilst some projects are being brought to market to address these trends, there is significant untapped investment potential in the emerging micro-apartment sector, particularly in Prime Central London.
As the second most visited city in the world (after Bangkok) with 19.1m stays in 2016, there is a notable gap in the market for schemes targeting foreign corporates and international students.
Not only has the accommodation sector failed to capitalise on this, it is has also failed to wake up to the digital revolution as millennials demand instant connectivity and services on demand.
Catering for the changing requirements of international visitors
Specialising in meeting the changing needs of international visitors, London Central Portfolio (LCP) has focused on maximising income and capital returns in the accommodation sector for over 25 years. A full service asset manager specialising in identifying the best real estate opportunities, developing them and letting them out on behalf of private investors and institutions, the value of its investments has exceeded average market growth by over 36%.
The company, which has over $1bn over assets under management, focuses on Prime Central London for an innovative product targeting these international visitors. They not only want small well-optimised spaces but increasingly desire flexible lengths of stay. And as the digital generation, they expect high-tech solutions to their needs. Requirements not met by the traditional hotel, serviced apartment or Private Rented Sector.
These are truly global citizens. Students - looking for turnkey accommodation during their university terms with the freedom to leave during their holidays. Executives - looking for a week-time pied-a-terre. The transient global business traveller – looking for a welcoming and familiar bolthole whenever they are in town. Brexit is also playing its part with corporates looking for increasingly flexible options for staff with no fixed term contracts.
Access to a concierge and communal facilities is also becoming increasingly important, according to a survey by Knight Frank. Just as superfast broadband, satellite TV and utilities immediately on tap becomes a must. Tenants are willing to pay a premium for these amenities and want all costs rolled in together.
The Portfolio Club
Having seen these changing requirements first hand, London Central Portfolio’s latest offering is the The Portfolio Club. Designed to offer complete flexibility of stay for international visitors and so much more, it will be the first such accommodation in the UK – a hybrid product bringing together hotels, serviced apartments and the Private Rented Sector in Prime Central London.
Why Prime Central London? 87% of long stay visitors are now international with corporates making up 58% and independently wealthy students representing the remaining 42%. Demand for accommodation is underpinned by Central London’s appeal for business, education and tourism. Long term price appreciation and income yields result from the scarcity of stock and lack of new build opportunities. According to PWC, there will be a 50% increase in overseas corporate assignments by 2020, putting further pressure on accommodation.
The Portfolio Club will not only offer the flexibility to stay for a few nights, weeks or years, but it has been designed to meet all of the other demands of overseas visitors, from London’s corporates to international students alike.
Targeting the mid-price range short and long stay sector, the Portfolio Club provides interior designed and turn-key micro-apartments, equipped with smart technology. Akin to a boutique hotel, tenants will benefit from a concierge, communal gym facilities, meeting and study spaces and a Club Lounge, with all bills and Wi-Fi rolled into an all-inclusive charge.
Purchasing existing discounted freehold assets and capitalising on refurbishment uplift, returns will be generated by a mix of short and long term stays, further enhanced through a pay-as-you-go ‘at your service’ App, uniquely designed by LCP. This will be tailored to guests every need; from laundry to fridge filling, from take-aways to tutors and all the services a busy executive or student could dream of.
Phase 1 of the Programme is aimed at developing a portfolio of properties in London
Phase two will then look to expand across other key global cities, capitalising not only on the changing requirements of the millennial generation worldwide but building on its strong brand values as a tech-based, design-led product, maximising future returns.